Attachment 1 R16-309

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2 Attachment 1 R BACKGROUND REPORT The Stafford Regional Airport Authority (SRAA) Chairman, Hamilton Palmer, contacted the Chairman of the Board of Supervisors by letter dated August 2, 2016 (Attachment 3), to request modifications to the 2012 Memorandum of Understanding (MOU) (Attachment 4) between the SRAA and Stafford County. The letter also requested the Board waive outstanding water and sewer connection and pro rata fees, and accelerate water system improvements planned for the Centreport Area. The SRAA is proposing to directly finance a new 15,000 to 22,000 square foot hangar for maintenance and overnight storage of aircraft. The SRAA feels that the return of 55% of total revenues from ground leases would hamper their ability to secure a commercial loan, and that the payment of 55% of total revenues is excessive for a facility financed directly by the SRAA. The SRAA maintains that an appropriate rate of return for the County is 55% of the net revenues for the proposed new hangar. This matter was considered at the September 7, 2016 Infrastructure Committee meeting where it was pointed out to the SRAA representatives that the Board did not have the authority to waive utility fees, but that the Board could consider paying the fees directly on behalf of the SRAA. It was further noted that funds for this were limited, and that a compelling case would have to be presented by SRAA for the Board to consider funding the estimated $143,700 in utility fees. Committee members expressed some support for modifying the repayment calculation for this facility, although there were questions about the financing previously obtained by the SRAA, the liability of the County for this financing, and the status of payment for the Airport Terminal loan relative to a subsequent loan for the proposed hangar. The SRAA responded to these concerns in their September 18, 2016 correspondence (Attachment 5), and provided a list of all financing obtained by the SRAA (Attachment 6) with the outstanding loan balance for each. The SRAA has requested further consideration of their request by the Infrastructure Committee at the October 4, 2016 meeting, to modify the MOU to provide 55% of net revenues from the proposed new hangar financed and operated by the SRAA towards repayment of the terminal loan. Staff has provided an amended and restated MOU for the Board s consideration. If approved and executed, this amended and restated MOU would replace the 2012 MOU.

3 R PROPOSED BOARD OF SUPERVISORS COUNTY OF STAFFORD STAFFORD, VIRGINIA RESOLUTION At a regular meeting of the Stafford County Board of Supervisors (the Board) held in the Board Chambers, George L. Gordon, Jr., Government Center, Stafford, Virginia, on the 4th day of October, 2016: MEMBERS: VOTE: Robert Bob Thomas, Jr., Chairman Laura A. Sellers, Vice Chairman Meg Bohmke Jack R. Cavalier Wendy E. Maurer Paul V. Milde, III Gary F. Snellings On motion of, seconded by, which carried by a vote of, the following was adopted: A RESOLUTION AUTHORIZING THE INTERIM COUNTY ADMINISTRATOR TO EXECUTE AN AMENDED AND RESTATED MEMORANDUM OF UNDERSTANDING WITH THE STAFFORD REGIONAL AIRPORT AUTHORITY WHEREAS, the Stafford Regional Airport Authority (SRAA) is proposing to seek commercially available financing for a proposed new hangar at the Stafford Regional Airport to allow it to operate a maintenance facility and lease overnight hangar spaces for visiting aircraft; and WHEREAS, the current Memorandum of Understanding (MOU) between the County and the SRAA, establishing the requirements for repayment of the loan by the SRAA to the County for construction of the airport terminal, contains provisions that will impede the SRAA s ability to obtain financing for the proposed hangar; and WHEREAS, the current MOU requires that the SRAA reimburse the County with 55% of the total revenues from the new Corporate Aviation Hangar Facilities; and WHEREAS, amending and restating the current MOU to allow reimbursement to the County with 55% of the net revenues from new hangar facilities financed and operated by the SRAA is equitable; and WHEREAS, an Amended and Restated Memorandum of Understanding will allow the SRAA to obtain financing for the new hangar facilities and provide the County with an equitable rate of return in the repayment of the terminal loan;

4 R Page 2 NOW, THEREFORE, BE IT RESOLVED by the Stafford County Board of Supervisors on this the 4th day of October, 2016, that it be and hereby does authorize the Interim County Administrator to execute an Amended and Restated Memorandum of Understanding with the Stafford Regional Airport Authority.

5 Attachment 3 August 2, 2016 Mr. Robert Bob Thomas Chairman, Stafford County Board of Supervisors 1300 Courthouse Rd. Stafford, VA SUBJECT: Expansion Plans for Stafford Regional Airport 1. Stafford Regional Airport Authority (SRAA) intends to commercially finance and build a 15,000 to 22,000 square foot hanger to provide space for an aircraft maintenance facility as well as overnight, protected parking for business aircraft that frequent our airport and interim space for corporate aircraft wishing to permanently relocate at Stafford. Neither capability currently exists, and it is believed that establishing these services will encourage greater use of our facilities, generate additional revenue, and attract additional private sector investment at the airport. 2. As the governmental entity serving Stafford County, Prince William County and the City of Fredericksburg, SRAA does not exist to produce a profit distributed to investors. Currently, our primary source of income is the sale of aircraft fuel. All funds derived from these sales, less expenses, are used to pay down loans for existing infrastructure and current operating expenses. It should be noted that our focus has been to enhance the attractiveness of Stafford airport as a magnet for corporate investment; consequently, we have out of financial necessity deferred setting aside funds for the inevitable depreciation and replacement of our existing capital assets. 3. We intend to first seek alternative financing for the proposed hanger construction loan versus a moral obligation commitment from any jurisdiction that is represented by SRAA. This will necessitate commercial financing at a rate higher than that which would be available to us if a moral obligation was forthcoming from one or more jurisdictions. Given this assumption, our financial analysis indicates construction of the proposed hanger will likely be financially possible if three of the following conditions can be met: a. SRAA, as the hanger owner, is exempted from paying fifty-five percent (55%) of the gross income derived from hanger fees (only on hangar s owned by SRAA) as repayment for the terminal construction loan. This is necessary to permit the anticipated revenue stream from hanger clients to cover the cost of the hanger construction loan. b. Stafford County utility connection fees for water and sewer hookups, estimated to be nearly $200,000 for the Airport, are waived. Failure to do so would force SRAA to finance the hookup fees and increase the overall cost for construction. 95 Aviation Way - Fredericksburg, Virginia Phone ( Fax (540)

6 c. Stafford County will accelerate the planned water system improvements to provide sufficient water pressure for fire and sprinkler protection at Stafford Airport and specifically for this large hanger. 4. It is well known that Stafford Regional Airport produces a substantial economic benefit for the citizens of this region, both from jobs generated by its presence and the funds expended in the course of its operation. What is probably less well known is that the majority of its infrastructure has been funded by Federal and State grants and loans, loans that are the fiscal responsibility of SRAA. When we receive final approval to begin design and construction of our runway extension, an improvement that will be critical to the long-term potential of this airport, SRAA will be responsible for funding the 2% locality cost in addition to the 90% Federal and 8% State shares of the estimated $12Million cost for the extension. Construction of the proposed hanger, with assistance from Stafford County as outlined in paragraph 3. above, will better posture us to meet those future obligations by increasing the attractiveness of Stafford Airport for corporate investment and by demonstrating community commitment to its growth. SRAA would be happy to provide any information you or the Board of Supervisors might require. We look forward to your support in this matter. Sincerely, Hamilton G. Palmer, Chairman Stafford Regional Airport Authority 95 Aviation Way - Fredericksburg, Virginia Phone ( Fax (540)

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10 Attachment 5 September 18, 2016 Mr. Paul Milde, Chairman Stafford County Infrastructure Committee 1300 Courthouse Rd. Stafford, VA Mr. Robert Bob Thomas Chairman, Stafford County Board of Supervisors 1300 Courthouse Rd. Stafford, VA Via to: pmilde@staffordcountyva.gov bthomas@staffordcountyva.gov Dear Mr. Milde and Mr. Thomas, The Stafford Regional Airport Authority (SRAA) appreciated the opportunity to brief the County Infrastructure Committee on September 7 th. As a follow-up to the questions that were raised, I wanted to provide the following information: First, as was discussed at the meeting, SRAA is seeking to modify the terms of the agreement enacted by Resolution R at the May 15 th, 2012 Board of Supervisors meeting, specifically to add a sentence after minimum payment to the County of 55% of revenues from new commercial clients after the date of the MOU that reads: Additionally, a minimum payment to the County of 55% of net revenues will be assessed for new facilities that are built and operated by the SRAA after the date of the MOU. This change would recognize the critical distinction between gross revenues on commercial enterprises (those for which the SRAA would receive a lease payment from a lessee) and net revenues for those facilities that are built and operated by the SRAA where no lease payment is required. This will allow SRAA to financially undertake public-private financing for infrastructure improvements, where SRAA is responsible for principal and interest for such financing. 95 Aviation Way - Fredericksburg, Virginia Phone ( Fax (540)

11 Second, any loan obtained by SRAA from commercial lenders requires SRAA to assume ALL risk in the event of default. Stafford County would incur no legal responsibility for any default by SRAA to a commercial lender. Additionally, funds for repayment of the existing terminal loan, codified by R12-113, cannot be diverted by SRAA for any other purpose and would have to be paid before any subsequent commercial obligation of the SRAA. Finally, existing infrastructure loans from VRA to SRAA which were used for the building of T-Hangers, fuel farm, sewer and electrical power improvements are already guaranteed by the moral obligations of the three jurisdictions represented by SRAA. Attached is a summary of our current loan obligations and their status. Our financial profitability since the lowering of the aircraft tax in 2009 has made any default on these loans extremely unlikely. Third, SRAA will be required to fund the locality portion (2%) of the cost of the runway extension. These projected costs and timing of these are as follows: 1. FY 18 Runway permitting and mitigation estimated SRAA share $10, FY 19 Runway extension design - estimated SRAA share $10, FY 20 Runway extension construction start - estimated SRAA share $160, FY 21 Runway extension construction finish - estimated SRAA share $80,000. We believe these projected costs are manageable, given our current financial performance, as well as the anticipated economic benefit to be derived by construction of the proposed 22,500 Sq. ft. hanger. Please contact me if you have any questions. Sincerely, Hamilton G. Palmer, Chairman Stafford Regional Airport Authority attachment 95 Aviation Way - Fredericksburg, Virginia Phone ( Fax (540)

12 Stafford Regional Airport Authority Financing Breakdown Debit service Amount Borrowed Interest rate Origination Date Outstanding Balance Monthly Interest Monthly Prinicipal Term Maturity Date Moral Obligation Payment Generation Project built with these funds VRA 04 $ 743, ** /14/2004 $ 490, $ 1, $ 2, year 4/1/2029 Stafford Tee 1 rents T Hangar #1 & Fuel Farm VRA 05 $ 1,075, *** /9/2005 $ 590, $ 1, $ 5, year 7/1/2025 Attachment 6 Stafford, Prince Willian, Fredericksburg Tee Hangar # 2 & 3 rents Portion of T Hangar #2& #3 VRA 07 $ 1,601, **** /21/2007 $ 1,092, $ 4, $ 6, Year 7/1/2027 Stafford, Prince William, Fredericksburg Tee Hangar 5 & corporate rents T #5 balance of T #2 & #3, 3 Phase power water & sewer in Corporate area SC Moral Obligation $ 133, /4/2009 $ 90, $ - $ 1, none Hangar 51 55% of ground lease VRA paymnet due to High Aircraft tax rate SC Terminal Const $ 1,316, /12/2012 $ 1,299, $ until loan is retired In full none 55% of any Corporate lease Bank At Union LOC $ 118, /13/2015 $ 60, $ $ - none Fuel Sales ** Intrest reduction in 2015 No equity cashed out! *** Intrest reduction in 2015 No equity cashed out! **** will investigat possibility of an interest reduction in 2017 ** Reduced from 5.15% *** Reduced from 5.95%

13 Attachment 7 AMENDED AND RESTATED MEMORANDUM OF UNDERSTANDING BETWEEN COUNTY OF STAFFORD, VIRGINIA AND STAFFORD REGIONAL AIRPORT AUTHORITY Board of Supervisors Robert Bob Thomas, Jr., Chairman Laura A. Sellers, Vice Chairman Meg Bohmke Jack R. Cavalier Wendy E. Maurer Paul V. Milde, III Gary F. Snellings C. Douglas Barnes Interim County Administrator This Amended and Restated Memorandum of Understanding ( Memorandum ) is made this day of, 2016, by and between the County of Stafford, Virginia, a political subdivision of the Commonwealth of Virginia ( County ), and the Stafford Regional Airport Authority, a public authority created pursuant to Section , et seq., of the Code of Virginia, 1950, as amended ( SRAA ) (the SRAA and the County, together, the Parties ). WHEREAS, in 2012, the SRAA requested a loan from the County in the amount of One Million Four Hundred Thousand Dollars ($1,400,000) to assist in financing the construction of a terminal building at Stafford Regional Airport; and WHEREAS, the Board of Supervisors of Stafford County adopted Resolution R on May 15, 2012 authorizing a Memorandum of Understanding (MOU) between the SRAA and the County; and WHEREAS, Resolution R budgets and appropriates funds not to exceed One Million Four Hundred Thousand Dollars ($1,400,000) from the FY2013 Transportation Fund for a loan to SRAA for construction of a terminal building at Stafford Regional Airport; and WHEREAS, Resolution R authorizes the County Administrator to sign a Memorandum with the SRAA that reflects the SRAA s commitment to repay the loan as soon as possible, with a minimum payment to the County of 55% of revenues from new commercial clients after the date of this Memorandum; and WHEREAS, the County and the SRAA entered into the original Memorandum of Understanding on July 17, 2012 (2012 MOU); and WHEREAS, the SRAA now desires to finance and operate a new hanger for aircraft maintenance and overnight aircraft storage under their ownership; and 1300 Courthouse Road, Stafford, VA Phone: (540) Fax: (540)

14 WHEREAS, the Parties desire to amend and restate the 2012 MOU, pursuant to this Memorandum to provide a minimum payment of 55% of the net revenue from this and any subsequent new facility that is financed and operated by the SRAA, as further detailed below; NOW, THEREFORE, the Parties bind themselves to this Memorandum and the 2012 MOU for a loan from the County to the SRAA in an amount not to exceed One Million Four Hundred Thousand Dollars ($1,400,000) for the purpose of financing a portion of the construction cost for a terminal building at Stafford Regional Airport, and the SRAA s repayment thereof (the Terminal Construction Loan ), in accordance with the following terms and conditions: 1. The SRAA earmarked 55% of ground lease income from a corporate expansion site with an existing corporate client to repay the August, 2009 Moral Obligation support provided by the County in the amount of One Hundred Thirty-three Thousand Nine Hundred Fifty Dollars ($133,950). 2. The Terminal Construction Loan funds were disbursed by the County to SRAA over the course of construction of the terminal building in amounts to be determined and supported by the construction contractor s progress billings detailing the total amount paid and allocating funding between the Virginia Department of Aviation and the County. The County, in its sole discretion, may request any additional documentation that it deems necessary or appropriate. 3. The total amount of the Terminal Construction Loan is $. 4. The SRAA commits 55% of the ground lease revenues from new corporate or commercial clients of the Corporate Aviation Hanger Facilities acquired after the date of the 2012 MOU (the New Clients ), and not including the existing client referenced in paragraph 1 above, and subject to modification for those facilities built and operated by the SRAA addressed in paragraph 5 below, to the County to repay the Terminal Construction Loan. 5. The SRAA commits 55% of the net revenues for new facilities which are built and operated by the SRAA after this date of this Memorandum. 6. The SRAA shall commence repayment of the Terminal Construction Loan to the County promptly upon successful ground lease negotiations and receipt of lease payments from New Clients, not including the existing client referenced in paragraph 1 above. 7. The SRAA payments to the County shall increase with each additional lease with New Clients at the stated rate of 55% of ground lease revenues received, except for those facilities referenced in paragraphs 1 and 5 above. 8. The SRAA shall continue repayment to the County until the Terminal Construction Loan balance is retired in full. Nothing in this Memorandum shall prohibit SRAA, in its sole discretion, from (a) repaying the Terminal Construction Loan in full or in part at any time, or (b) committing a greater percentage than 55% of the ground lease revenues from New Clients to the County to repay the Terminal Construction Loan Courthouse Road, Stafford, VA Phone: (540) Fax: (540)

15 This Amended and Restated Memorandum of Understanding represents the entire understanding of the Parties with respect to this agreement and supersedes any prior agreements, whether written or oral. Any amendment or modification of this Memorandum must be in writing and signed by the Parties. This Memorandum shall be governed by the laws of the Commonwealth of Virginia. The Circuit Court of Stafford County, Virginia shall be the exclusive venue for any legal action related to this Memorandum. County of Stafford, Virginia: C. Douglas Barnes Date Interim County Administrator Stafford Regional Airport Authority: Hamilton G. Palmer Chairman Date Approved as to form: Stafford County Attorney s Office Printed Name: Title: Approved as to form: Printed Name: Counsel for Stafford Regional Airport Authority 1300 Courthouse Road, Stafford, VA Phone: (540) Fax: (540)